** Gold price breaks out of recent range on Federal Reserve Chair Yellen's Congressional testimony.
** Silver prices lag and face several months' resistance nearby.
** Precious metals might see some consolidation if not profit taking.
Call it what you will, but the Federal Reserve has an unwavering grip on various asset classes across global markets. The behavior of several headline markets, namely Gold (CFD Ticker: XAUUSD), US Treasuries, and the S&P 500 (CFD Ticker: SPX500) suggests that traders see the Federal Reserve's QE3 stimulus program carrying forward into the future for a greater than otherwise anticipated time. When bonds, stocks, and precious metals rally all at once, and usually at the US Dollar's expense, it is a sign that the "QE" trade dynamic from 2009 to 2011 is active. Why is this the case? When the US Dollar falls, commodities denominated in dollars rise in value, i.e. precious metals. A falling US Dollar is sparked by falling US Treasury yields, which happens as traders buy bonds ahead of the Federal Reserve's QE efforts. With cheap liquidity in hand, traders also flee to riskier assets like equity markets, i.e. stocks. The resiliency of the price of gold and silver prices (CFD Ticker: XAGUSD) the past three weeks builds on the two themes currently driving the Fed. First, the period of range trading in gold prices between
Both the "closing range" (above
A well-known trading idiom made famous by
The Doji daily candle on Wednesday suggests that the market may be ready to pause. The Slow Stochastic indicator has seen the %K and %D differential narrow. This means that the momentum setting higher highs is starting to wane. In the event that XAU/USD turns lower from some combination of profit taking and/or new sellers arriving, the important level to hold will be at
Even though gold prices have broken out, silver prices have been the laggard. Gold has yet to overtake its 2014 closing high of
Because gold and silver have moved together so closely recently (rolling 20-day correlation of +0.80), a pause in the gold breakout most likely means that silver will stay in its three month long range. But precious metals bulls shouldn't be discouraged just yet: if gold and silver are able to work off these overbought levels without sacrificing price, it would be an indication that buyers are coming in to support price with a breakout in mind. A gold price breakout would be watched for above